Reaffirming Our Price Targets on 2 Holdings
Investment banking pipelines picked up in Q3 2025, but we could see an IPO speedbump ahead.
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Coming off yesterday’s stronger-than-expected September-quarter results from Bank of America (BAC) and Morgan Stanley (MS) , we are reiterating our price targets for those two holdings of $60 and $170, respectively, as well as our Two ratings.
During their earnings calls, both companies shared their investment banking pipelines picked up during the quarter with gains across industry groups and transaction types. However, we also recognize that the longer the current government shutdown goes on, the more likely we are to see a speed bump for transaction activity, especially the IPO market.
Our view remains that this is likely to be a timing issue and could have a modest impact on the current quarter. But as we see it, all that means is a potentially more vibrant market in 2026, especially in an incrementally lower interest rate environment. As we see indications that the IPO market is either not decelerating as many suspect it could or we move past this speed bump, we’ll revisit our BAC and MS targets. An acceleration in M&A deals would give us another opportunity to revisit those targets.
We will also share that we are seeing multiple firms boost their BAC and MS price targets today, taking their BAC targets to $55-$67, from $50-$66, and their MS targets to $170-$185, from $155-$170. We’ll have more on this in tomorrow’s Weekly Roundup.
During BofA’s earnings call, management noted it is reaping the benefits of past technology investments in digitization and automation in its Commercial Bank and should see more as the impact of AI is felt. That increases our comfort with the recent segment margin improvement being sustainable, and it likely means we could see additional branch closures. On this topic, management also said it is starting to see similar benefits in its institutional-facing businesses. This may not play out immediately or in the next few quarters, but it has the potential to help lift the company’s margin profile, which would allow more revenue to drop to its bottom line.
At the time of publication, TheStreet Pro Portfolio was long BAC and MS.
